tv Confirmation Hearing for Federal Reserve Board Nominees CSPAN February 13, 2020 10:35pm-12:30am EST
book festival live starting saturday at 9:00 a.m. to watch oure sure live coverage of the tucson festival of books next month on on c-span 2. > c-span, your unfiltered view of government created by cable today9 and brought to you by your division provider. next, a confirmation hearing for nominees to the federal reserve board of governors. judy shelton was questioned by lawmakers on both sides regarding her previous public and opinions on monetary policy. christopher waller, another board, also the testified before the senate banking committee.
>> this hearing will come to order. this morning we'll consider the nominations of the honorable shelton to be a member of the board of governors of the federal reserve system and dr. hristopher waller to be a member of the board of governors system.federal reserve welcome and congratulations to each of you for your nominations. family in the nd room today and i welcome them as well. we're fortunate to have these two highly qualified nominees today.ng these positions are critical to nsuring a safe, sound and vibrant financial system and to help the growing economy. the federal reserve was created by congress as the nation's to promote a stable conomy and a safer, more flexible financial system. among the federal reserve's responsibilities is conducting the nation's monetary policy
the mandate of promoting maximum employment, stable moderate long term interest rates. n addition to its monetary policy, a significant portion of the banking sector including and community banks as well as certain nonbanks and it aims to foster a efficient payment and settlement system. with this in mind it's important nominate and confirm well-qualified candidates with different perspectives to the of governors to ensure robust debate and more effective decisions. before turning to dr. shelton and waller i'm entering into the record a letter from over a economists supporting the nominations of dr. waller nd also an article from the "wall street journal" supporting dr. shelton titled "the war on shelton." most recently he served as the executive director for the e.u. reconstruction and development and was confirmed by oice vote in the senate in
2018. dr. shelton's experience working for nonprofits and academic forged her deep knowledge of democracy, economic thaty, and monetary policy will broaden and diversify the fed's perspective. the aller has served as research director at the federal reserve bank of st. louis for aided the years and president of the st. louis fed in analyzing the economy and u.s. monetary actions. his research on monetary theory the microfoundations of money and payment systems will be available as we're seeing a and in crypto currencies digital currency in this country and abroad. shelton dence that dr. and dr. waller will bring strong leadership to the federal system. as governors of the federal dr. ve, dr. shelton and waller will play key roles in arrying out the fed's regulatory and supervisory activities while also playing an
important role striking the balance between regulations and safety and soundness. appreciate the positive meetings i've had with each of you. leading to today's hearing. i look forward to continuing a robust discussion on the topics.g the importance of right sizing regulations and tailoring the framework to support a vibrant, growing economy while safe and sound financial system. ssessing market-based fixes to maintain stability in money markets. the development of central bank currencies and other technological innovations in the inancial space which we also discussed with chairman powell yesterday. and continuing to encourage the to submit all rules to congress under the as wellional review act as to submit all significant guidance for purposes of the congressional review act. i look forward to working with dr. shelton and dr. waller on where the ther areas
fed and congress can further reduce unnecessary burdens and promote economic growth. congratulations again on your nominations, and thank you and your families for your to serve.s senator brown. you, mr. chairman. welcome, and thank you for earlier this hearing because of votes coming. ms. shelton and mr. waller, i extend my to greetings to family and friends who have joined you. welcome. independence matters. we know economies with ndependent central banks have less price volatility. fewer bank mechanics, and more stable communities. nominees, though, today, before us, doesn't independent fed and has spent her entire career advocating for policies that make her economy more volatile, give families and usinesses even more to worry about in an uncertain world. the point of the independent
a eral reserve is to be teady, guiding hand to worry about the big picture of the economy, so hard working amilies don't have to but for ms. shelton these aren't hazards to avoid. they are the goal. e all understand there are economic issues, there are conservatives and liberals and most people fall somewhere in the middle of that continuum. for ms. shelton, she's not a conservative. she's far outside the mainstream. off the ideological spectrum. for three decades ms. shelton a prominent advocate for returning to the gold standard. n making the case for ms. shelton's nomination her friend james grant wrote in the "wall street journal" with the of shelton to the fed the discussion is tilted to gold. legacy, form of money, ms. shelton contends, the old standard is a reputable, even superior form of monetary organization. unquote. disagree on ree to certain issues, but we don't get our own facts and the facts are
clear. as a nation had followed ms. shelton's advice and had not the gold eyond standard nearly a half century ago our nation would have bust d from boom to without the monetary tools us out of the ll recessions. depressions would have been deeper and longer. families f working would have suffered even more no for certainly inexplicable reasons to them. that's not the end of the story. in multiple writings ms. shelton clearly voiced her opposition to fdic deposit insurance. he insurance that everyone takes for granted that's been part of our culture and our economy for so many years. insurance, most importantly that protects the savings of hard working americans. she thinks that if a bank fails, we all remember vividly 10 to 12 years ago when they did indeed fail, whose l the families savings and paychecks are stored in that bank should just lose all of their money.
passing federal deposit insurance was one of president roosevelt's first acts during depression for a reason. that guaranteed that your money bank, and the bank is the bedrock of the modern economy. some yurl exercise about moral hazard. this is the real world. dare for explain to explain to orking families in pennsylvania, louisiana, minnesota, or new jersey or i dare anyone to explain to working families that closures in the great recession or the savings crisis, that fdic hugely distorting factor. with ms. shelton it doesn't stop there. the money in your wallet is by the full faith and credit of the united states government as ms. shelton away with dollar and replacing with it a common
currency for north america. make nafta more effective she believed the replaced with a common currency for north america called the amero. amero.er at other times she's called for the creation of a generic global currency backed by gold. globalist ideology doesn't belong anywhere near our federal and of monetary policy. american dollar is the world's reserve currency. it should stay that way. we want that it way. that way t should be and we're proud of it the bottom line is michelle has ideas and has ng flip-flopped on too many important issues to be confirmed for this job. know she'll say exactly what the president wants her to say. further threatening the fed, she wasof the an interest rate hawk until president trump wanted lower rates. opposed tariffs in china before she was for them. i and other n what committee members heard in meetings with her, it appears
changed pretty much all of her positions on everything from the gold standard to britton woods to opposition to fdic insurance. that's not the steady hand at the fed. 11 years into this recovery more than ever the fed needs to be and careful, not reactive to every tweet coming out of the white house. a vote for ms. shelton is a vote against that independence and reputation as a financial bulwark for the whole world. our other nominee to the board, mr. waller, whose work has been pere view and whose analysis -- i look forward to hearing more about how he'll wall street accountable if he's confirmed. ast, mr. chairman, i want to note that there should have been a third chair at this table. exactly sure why. but ms. jesse lou was supposed to be considered by this today.ee her nomination was withdrawn 36 hours ago although the treasury
publicly told me yesterday he knew for two days, so i don't think the chair of this committee and i didn't ranking member, position she was not a natured or is responsible for oversatisfying our terrorist ork for preventing drug cartels, now that her nomination has been withdrawn that position will remain empty. again, to protect himself the president of the united national security at risk. >> thank you. we'll now administer the oath. hand. your right do you swear or affirm that the testimony you're about to give is the truth, whole truth and but the truth so help me god. do you agree to appear and estify before any duel constituted committee of the senate? thank you, you may be seated. >> your written statements will record in t of the their entirety, and before you
i invite statements to you introduce your families in attendance. you may start, ms. shelton. >> thank you for the opportunity to appear before you today. i'll honored that the president has nominated me to serve as of the board of governors of the federal reserve system to this rateful committee for considering me for the position. deeply grateful for the support of my husband of 42 gill, who is here today along with our son gib. and i want to give special thanks to my mother, jeanette and the healthy contingent of family members seated behind me. ohn and jim and christie, rick and susie. from ll flew out
california to be here today with me. i means a lot. going rly four decades back to my years as a doctoral student at the university of tah i've focused on the impact of monthly tear policy on economic performance. studies encompass current financial and economic as well as historical and seed can't to our constitution. one power is clear the value to regulate u.s. money granted to congress. congress created the federal independent agency and through the federal reserve reform act of 1977, charged it a mandate to promote maximum employment, stable moderate long term interest rates. has been l bank entrusted with considerable power to carry out its responsibilities. along with the political ndependence and operational
autonomy granted to the federal reserve comes an obligation to both to accountable public.s and to the if confirmed, my priority will policy pport monetary that facilitates productive conomic growth while also ensuring the soundness and stability of the u.s. financial system. in exercising the federal reserve's regulatory oversight, policies that are effective, efficient, and tailored to financial institutions, allowing them to better serve their and communities in ways consistent with maintaining financial system. i am well prepared to onscientiously fulfill the duties of the position for which have been nominated, based on my background and experience. the first college course i ever was money and banking.
as a research scholar at the stanford titution at university, i analyzed the elationship between monetary policy and economic sustainability in the context of competition. my first book accurately redicted the collapse of the soviet union. my second book examined the movements on ency trade. i have testified numerous times expert witness before congressional committees in both senate.e and as vancouver director of the european bank for reconstruction demonstrated t, i strong leadership to achieve igh priority objectives in accordance with u.s. strategic interests. ombining academic perspective with real world insights, i hope o contribute intellectual diversity as a governor and
sound ork to promote money and sound finances. i wish to emphasize my commitment to honor the constitutional authority of the value regulate of u.s. money. y fulfilling the statutory mandate congress has assigned to the federal reserve, we ensure remains the's money world's most respected currency trusted standard of value. thank you again for the appearing before you today, and i look forward to your questions. # you.ank dr. waller? and ranking member brown, members of the committee, thank you for the opportunity to today.before you i am honored to have been nominated by the president for prestigious position and grateful to the committee for its consideration of my nomination. humbled to be able to serve my country in this capacity.
i'm also thankful for the my family members who are here with me today. three ng wife, lori, my children, sarah, maggie and sam, ann, who has been my hero throughout my life. for the last 11 years, i have as the director of research at the federal reserve bank of st. louis. time, i have attended over 60 federal open market committee meetings and served as the main policy adviser to my bank president. this experience, support nderstand and the dual-mandate of the federal reserve. i appreciate the federal pursuing role in ensure a safe and stable financial system. if confirmed i'll continue to policies that achieve our dual-mandate and maintain financial stability. my background and experience makes me uniquely ualified to fulfill the
responsibilities of a federal reserve governor. experience as ng a senior reserve bank official i was deeply involved in policy issues confronting the federal reserve. but in my role i also spent a substantial amount of time to members of our community about how monetary olicy affected their lives and their businesses. that public input affected how i and its bout policy consequences. i also learned how valuable it communicate clearly to the public what our policies pursuing hy we were them. in addition to my experience as official i wasve an academic for over 25 years i did a substantial amount theory rch on monetary and policy. i've written extensively on bank ndependence for the conduct of monetary policy. my research also focused on the entral bank can be made
accountable to the electorate without giving up its independence. studied the , i importance of the nomination and onfirmation process in achieving central bank accountability. federal reserve has been given tremendous responsibility by congress to use its policies the lives of the citizenry. congress has also given the federal reserve tremendous to pursue those policies as needed. but in return it must be to the public for its actions, and be able to explain what those policies are why they are being pursued. if i am confirmed, i pledge to my colleagues to mplement policies and help us meet our dual-mandate. i also pledge to be accountable for those actions and to be transparent as to why those actions meet our were taken. thank you again for the privilege to appear before you today. look forward to your questions. >> thank you very much.
the questioning with a couple of questions for each of you to answer. you don't need to give long as long as it's the right answer. [laughter] >> first. importancee with the of right sizing regulations and supervisory framework to support a vibrant rowing economy while also ensuring a safe and sound financial system. >> yes, i do, mr. chairman. well., i do as >> that was the right answer. >> do you agree that it's encourage the federal reserve to submit all rules to congress under the review act as well as to submit all significant guidance for purposes of the cra? >> absolutely. do.yes, i >> all right. thank you. >> again, this is for both of you and you can give a longer this one. >> the federal reserve critical to is enacting monetary policy and long term objectives.
i and every single member of this committee and senate the federal re reserve is independent. there is strong bipartisan upport for maintaining fed independence. spectives on per spent maintaining eserve its independence? >> thanks very much, mr. chairman. i believe the independence of federal reserve is a vital its credibility with the public. congress has granted tremendous owers to the federal reserve and citizens have to be assured that monetary authorities will relying on their own best own ent and their analytical capabilities, not pressure.o political >> dr. waller? lived and breathed independence for the last 35
my job, as an official. he right policies, best economic performance and to look at the date to determine how you as opposed tolicy partisan influences. >> thank you. you to g to ask both of answer it. >> but i want to start with dr. shelton. have tried to me characterize your support for the gold standard as outside the mainstream thought and disqualifies you for this position. what exactly are your views on policy and the gold standard? > i would not advocate going back to a prior historical monetary arrangement. i think it's really important to acknowledge that the power to regulate the value of u.s. money given to congress by our constitution. created the has federal reserve as an independent agency and given its
monday date that's the framework under which i'll make decisions if confirmed as a member of the board of governors. historical d at systems going back to the beginning of our country because think you can, i think you can insights by comparing economic performance under one set of monetary rules another. but money only moves forward and evolving faster than ever these days so i only use it to give perspective on money. >> thank you. your views on this, doctor, dr. waller. >> first, i studied monetary years. for the last 20 have studied both asset-backed as well as fiat monetary systems which we currently have. system is netary pretty much what we have around the world. it works well as long as it's ell managed by the central bank. there is no need to have the inefficiency of tying things to standard or any other real asset if needed.
you.ank >> senator -- >> thanks. i want to talk about that independence in a slightly way.rent i appreciate his questions. mr. waller, i'll start with you. do you think chairman paul has good job making independent decisions regardless of what the president tweets at him? i think chairman powell has been very professional in his policies asying out best he can and building a committee.on the >> i'll ask you the exact same question, ms. shelton. do you thinker chair powell has one a good job making independent decisions regardless of what the president tweets at him? > thank you, ranking member brown. i think chair powell and every open of the federal market committee is sufficiently their ssessed to rely on own judgment. i don't think any of them are influenced by political pressure. okay if the president of the united states tweets at them and calls -- the
calls him names and said he's not doing good things for the economy, that's just okay? >> well, i don't censure what other people say but do i american, every member of congress, and even the president has the right to our federal reserve. >> based on what the president powell, ms. hair shelton, it looks like the fed, you could watch this and we all, committee in both parties, are fed watchers to a you could watch this, these attacks by the president n his chairman, our chairman now, it looks like the president and the federal reserve aren't together.ell do you think that the chairman is doing a bad job accommodating wishes?sident's >> i don't think it's the job of he federal reserve to accommodate political agendas. what i'm saying is, the fed independently as it should, working for the best
nation.t of the >> understanding that will be your answer to the next bear with me a little bit here what do you think about the president's criticisms of chairman powell? said -- >> is the president right? is chairman powell right? censuring d i'm not what other people are saying. >> i'm not asking you to censure, we have something we've history n in american where the president of the united states consistently attacks his own nominee, whom us, myself included up here, voted for, trying to get things on ifferent economic policy. what do you think about what the censuring him t but what do you think about the president's advice to chairman what he tells him to do? what we've seen historically is some fed chair men have felt they were being pressured behind the scenes in. it's refreshing, if that's out in the open, and as i say, everyone, certainly journalists dissect a ry word that's uttered by
federal reserve official, and it's available, all the nformation, anyone can make a comment at any time. i think that the chairman of the federal reserve has done a pretty good job independent when he testified yesterday. and senator dy rounds, and senator -- several leaving out s, i'm a couple, all emphasized, emphasized, certainly complimented the chairman for independence but he emphasized how important independence s. you pledge to be independent regardless of what you to do?rump tells >> thank you, senator brown. i pledge to do what's best for he economy in terms of how i read the data and what's best to ual-mandate.e our dahlman ms. shelton, do you plan to
regardless of what the president tells you to do? independent and frankly no one tells me what to do. >> my last comment and question, three decades you've written extensively, some 95 and books including several on opeds in the last years. can you explain why you've published in the "wall street journal" time and again praise one set of provocative beliefs, that the u.s. should return to the gold standards, is an interloper in the marketplace and should be abolished. come before congress you claim you're firmly in the mainstream of economic thought. i'm troubled with that. paper trail for 30 years. you seem to be the new judy the old judy shelton. what are we to make of that? think i've been intellectually consistent since in 1994 called "money meltdown," restoring
global currency system. i don't claim to be in the mainstream of economists but i don't think -- you're not an economist for one thing, right? >> i am an economist, sir. ph.d. was in something else. >> my ph.d. from the university administered through the finance department as majoring in international and economics, but it is a business administration degree through their school, yes. okay. >> senator shelby. chairman.you, mr. >> i think dr. waller and dr. extensive h have experience and academically qualified. i have no problem with that. shelton, i do have some writingsy some of your and some of the articles that have written about your writings. nd this is a good time to air
them out, i suppose. think the question to me and i've been on this committee a long time and we have, as than r brown, we're more fed watchers. e're tasked with the senate to evaluate all of you before not e confirmed or confirmed. some people say that dr. shelton, you're basically an outlier that you're not mainstream. don't have mainstream views in the economy. think, notost people everybody, that the role of the as ral reserve, you stated, tated by law -- [inaudible] full employment, whatever, that's goals, that we try to reach. reserve, when you're for it's a enerally long term. probably the longest term that
we have. times, up to 14 years, i believe. believe our views should be mainstream. how -- people deem you, a lot of people have, that you're an utlier, not a mainstream player. if you were on the fed, how work with the other members. with them on the price ability and full employment or would you be really an outlier? you, senator shelby. forward to much working with my colleagues at the federal reserve. respect for their capabilities, and for their judgment. i think i would bring my own perspective. the intellectual diversity strengthens the
and would be welcomed, and so that's what i would hope to bring, but goal of with the working with the people who are there as together we would try formulate monetary policy productive ve to economic growth. >> a lot -- you've talked about people have written about the gold standard. of the gold in the world, all that's been mined and all the jewelry in storage, it wouldn't be worth, i believe, to what our economy is worth. what the gdp of this country is worth. or the gpd of the e.u., or china or japan, and so forth. would that be true? >> that is true. so when you talk about the obviously rd, that was coming -- the gold standard came in the old economy, when we
had a barter economy basically, didn't it, in a sense? -- bartter i bartter yes.omy, >> is it a combination of the nation and the people backing all the wealth behind it? s that what we deem valuable today? >> definitely. > so talk to us a little bit about your views on the gold given up long was ago, and the other people in the world. i don't know if anybody is now, and do you still believe that's important why, and where are you? shelby. you, senator first, i totally agree with your assessment. back with money. it keeps moving forward into the future. and i'm surprised that people ttempt to say they must have
some thought about me advocating gold standard, and i suppose they are talking about the classical international gold standard. out that st point there is about 1.8 trillion in outstanding federal reserve notes. just the currency. most of it is held outside the country. you looked at the market value of the u.s. total holdings be less than ld even a quarter of that amount and that's just the most basic orm of money so i'm not sure what anyone -- >> it's a commodity, isn't it? >> at commodity. it has a historical use as a it's ry surrogate but mixed use today, and so, as i to look , it's useful at something that worked from the u.s. was when a participant in the classical gold standard. look at the to britton woods gold exchange standard where the u.s. was the
1944 to 1971, but that was 50 years ago, when we a monetary role for gold. we certainly have to just be looking toward the future. advocated a return to the britton woods program? i've said about the ritton woods agreement is that it did establish a level onetary playing field in terms of exchange rates. > that's when the word was in disarray right at the time of world war ii. >> precisely. lot of nations still struggling, the war wasn't over being puton woods was together by the united states. to bethinking is it going worth it to win because if we're going back to what we had in the when you had competitive evaluation, retaliatory tariffs downward reated a
spiral in international trade, that's not what we were fighting for. set up the britton woods agreement in hopes that it would be a better future, that nvestment would flow to its highest use around the world and people would not use economy underminereciation to the principles of free trade. thank you. >> thank you, mr. chairman. shelton, you're being considered for a very important position today. can you think of a "more challenge than serving on the fed"? stimulating challenge? >> than serving on the fed. >> it seems to me that would be ultimate for someone who studied monetary perform&economic performance. a quote moreink of meaningful responsibility than serving on the fed? gravely k it's responsible position. >> and can you think of a more important role than "safeguarding our nation's vital interests and deeply rooted fed"?s by serving on the
>> no, senator, menendez. words about serious serious responsibilities that will impact every american, but you fully whether understand the gravity of those words. just two years ago, you appeared before the senate foreign relations committee which i'm he ranking member for your nomination as the u.s. executive for tor of the e.u. bank reconstruction and redevelopment. in your testimony before the ommittee you said "given my background in analyzing the strategic implications of global financial developments and my democracy, tment to i cannot imagine a more stimulating challenge, more than gful responsibility, to take the role of safeguarding our nation's vital interests and deeply rooted values at the then i agreed with you yet during your brief tenure which you withdrew from missed 11 of 26 board meetings. you were the u.s. representative
bank. you were a senate confirmed position. it to just slightly over half of the board's meetings. dr. shelton, would you give promotion if they missed almost half of the most important proceedings that they to?e assigned >> thank you for the question, men then dez it's a matter of public record that my attendance was closer to 70% but let me explain something about the way -- >> do you dispute the numbers i said? >> absolutely i do. >> on how many you missed? >> not only that but there is a perfect correlation, which i explain, when i wasn't there, i was in washington meeting with the reported at the treasury department, i was conferring with my inner --leagues >> that's why we have telephones. -- matter of fact, ambassadors are given telephones. at each of the meetings you
issed you claimed you were in d.c. but you needed to be at the of the ing on behalf united states in these all important issues. ou know, i just cannot imagine that the foreign relations give an would ambassador a higher position if they weren't there nearly half the time that they were supposed to be. you're confirmed do you expect to serve your full temple on the fed? >> i do. do.ou well, that's what you told the foreign relations committee when you were confirmed as the director of the ebrd and here are. so i fail to understand how i seriously.hat answer showing up is a basic requirement of a job, and any of missed half of our votes, half of our hearings, i don't think our constituents us back.d let me ask you on a different topic, if we didn't have the deposit insurance do you think consumers would trust a mall unknown financial
institution with their money, or would they turn to bigger better name with recognition? totally r menendez, i support federal deposit insurance. we've had it since 1933. it's essential to depositors that they can safely put their money into american banks. his idea that i'm somehow against deposit insurance, i tried to find out where that came from. the only reference i could find depositen commenting on insurance goes back 25 years where in the course of the theory of moral if there is d that government insurance, in theory, engage in riskier financial behavior seeking profits, because they would be government the insurance. >> we had a lot of that, which recession, he great
not because of financial insurance, but at the end of the of your writings suggested that the deposit risk in our reases financial system. ut now you're telling us you support deposit insurance. you alsoncerned how -- made -- have you ever told the president of your views that no borders?a needs referring if you're to something i wrote in 2000ide explain the context of this rumor. i was talking, nothing to do -- it's what a rumor, you wrote. >> nothing to do with immigration. 2000, as i'm sure you're aware of, for the first time in mexico elected a president who had not been a member of the ruling party, and
ox was saying a that he recognized mexico was experiencing a collapse in its urrency every six years coinciding with their electoral cycle. he wanted to be something new. and he wanted to bring mexico's order, balance the budget, align their regulatory approach to banking, to closer to what we have in the united states, and i thought that should be encouraged. think we want a prosperous stable economy on our board and i also feel it's only fair for mexicans to have a chance to be their own country. so that's what that article was about. >> yeah. happy to submit it for the record, some articles speak quite differently to the views this ou have expressed on and some of the other things i've raised with you and we'll members decide in their judgment. chairman, and mr.
thank you, both nominees, for being here today and for the iscussion we had in my office separately, earlier this week. let me just say for the record i that using a price rule might include precious metals is an intellectual defensible monetary policy just for the record. >> is or isn't? defensible approach. dr. shelton, i understand that advocated for stable international monetary system. stability and exchange rates, nd i doubt there would be any disagreement that that is certainly preferable to the alternative. the concern i have is that we don't get to control other country's monetary behavior. have a vote on what they do. and i'm concerned about the which you advocate for our monetary policy to be and reactive to the foreign exchange behavior of other countries.
in august of 2019, in the wall street journal" article, an interview that you gave on characterized, it said, ms. shelton said in an interview banks in europe, china and japan are all devaluing the currency against monetary policy. when asked if the u.s. should follow suit she said yes. doesng at the interview it look like that's an accurate characterization to me. n july 2019 you wrote in the "wall street journal" piece and i quote, when the united states trading partners engage in it is not nipulation competing, it's cheating. that's why it's vital to weigh complications of the u.s. monetary policy on the dollar's xchange rate value against other currencies, unquote. n september of last year, in the "wall street journal" op ed you clarified your view that the alleged d fight this cheating, you said, and i quote in an era of worldwide currency
central banksca's should not i can more the effect other ments spurred by major central banks, with no consistent free trade principles governing global monetary take , the fed must proactive steps to ensure that he u.s. can compete successfully. unquote. so, i guess my direct question, things that these you have said and written, is it a major that if american trading partner were to significantly devalue its intentionally, aren't you saying that the u.s. should match that evaluation and the should play a role in achieving that devaluation? thank you, senator, for the question. and also for our discussion the day, which i thought was very substantive. agree with what you were policy that monetary executed by the federal reserve
achieving our domestic economic objectives and outlined very clearly by congress. said that among the factors that we need to to become a i were ember of the board of governors, is the political context of the global economy global finance, and i think we have to bay wear of what are doing.al banks last year, 49 central banks their interest rate, which caused their currencies to depreciate relative to the dollar, and it wasn't until july decided federal reserve likewise to lower a quarter point as they did the next -- minutes and e five we're down to one. question is, and i think the
conclusion we can come to is you believe the fed should actively seek to devalue currency if other countries are doing that, and i think that's a very, very dangerous go down. this beggar thy neighbor mutual not in devaluation is our interest. and it is not in the mandate of it.fed to pursue i don't think it's achievable. you've got multiple currencies, which ones would but watching? euro or the yuan. they could be moving in different directions and a fed has famously been unable to achieve its inflation target for years, why should we think that the fed by changing monetary policy is to achieve some currency target, i think, is very, very unlikely. so i just want to stress, i dangerous path to body of and the recent your work certainly seems to be advocating for that
intervention. >> if i may, senator. be an nat ma to suggest that we devalue our money to trade advantage. what i'm saying is within the framework for deciding monetary policy we also have to look at the impact on on stable prices, and if other central banks in those unfair practices, it can affect employment, especially our to facturers who have compete. >> but we can observe that from domestic data. we don't have to reference rates to change determine whether there is an adverse problem with employment u.s.e >> sorry, mr. chairman. >> senator -- >> thank you, mr. chairman. to thank you and the ranking member for having this being in front of the committee and your willingness to serve on the fed. to start with you, ms. shelton.
good idea toit's a sell our public lands? >> i'm sorry? >> do you think it's a good idea sell off our public lands? >> to sell off public lands? senator, honestly, i have never considered that. >> in a 2009 book that you said, for the purpose of balancing our budget, we i uld consider, and paraphrase, selling postal service, amtrak and federal lands. >> i don't recall taking that position. it's not something i'm strongly advocating. it's an important issue. where do you live? i live in fredericksburg, virginia. >> so they probably don't have a federal lands in fredericksburg, virginia. in montana we do have a lot of we've got s, and if peek out there in positions of position are in the of making sure that unemployment
do on the d, as we fed and we have people who have written about selling off things postal service and amtrak and our federal land that's a problem. would you see it as a problem? >> i understand what you said, that would be a problem for the local economy, or the area speaking of -- >> but not generally for the country? it's always ink disconcerting to change employment or make some --nsition away >> i think it's also important public lands hese drive an economy in montana and montana has only got a million a million ittle over people. it's about $7 million to our montana so for somebody to advocate this it would have pretty significant people whothe 72,000 work in this outdoor industry in montana? >> i believe, senator tester, decision up to congress. it would have nothing to do with the federal reserve. >> but you're right, but it does
impacts on people that are in positions of power and i'll has been pointed out by previous questioners, federal reserve is a position of power. one of the things that i like in is consistency. and i want to quote you omething that you wrote very recently, six months ago, because you have said today, and correct me if i'm wrong, that you are for independence of the fed. >> absolutely. ago, in a "wall street journal" on ed you wrote and i'll quote this directly it in keeping with the historical mandate, if the fed were to presume a more with nated relationship both congress and the president, shifting the independence of the fed out the it is?ell me what >> senator tester, that article legislation g the that has shaped the role of the federal reserve, especially with
accountability. i was quoting from the 1978 umphrey hawkins act, which was passed by congress a year after the federal reserve reform act. and what i was explaining is that that legislative language six economic out objectives for the country and then it says, "obtain. of these objectives should be acilitated by improved coordination by the --" that's the law, i didn't write that. >> i'm telling you if you pursue a need to -- the der coordinated potential of me having an i luence on the fed, which don't think is correct is real. >> honestly it surprised me to read that in the language -- of legislation, it surprised me to read it and i merely revealed hat and i've been subsequently surprised that it's attributed to me rather than to congress who wrote it. >> because you wrote it.
it --ote >> i was quoting from the legislation. >> let's go in a different direction. the gold standard. also in the "wall street journal," let's return to the standard. and you hope that vice president pence would hasten return to the standard. ou talked about a new bret be held in s mar-a-lago. > i would commit that the gold exchange standard with the united states having any kind of convert ability responsibilities. there is suggesting that having a stable international level monetary field is very supportive of free trade consistent with the principles of comparative and mutual benefit. >> ms. shelton, i really to eciate your willingness serve, i do, but i'm going to
something, when i read things and they say the things as directly as you said them, appreciate, by the way, here and, u come in by the way, can try to justify the dog doesn't hunt. i'm just you have a lifetime of writings and not once are there things that would indicate other than what i pointed out in this committee, whether it's sale of public lands, sale of postal service, gold standard or independence of the fed. thank you, mr. chairman. >> senator rounds. senator rounds: thank you, mr. chairman. welcome to the committee. i would like to go back a little bit. we had the opportunity to have chairman powell in front of us yesterday and i would like to remind my colleagues of what
chairman powell said yesterday about what we call group think. chairman powell agreed with me that group think is unhealthy and he said i'm strongly inclined to think that you need to hear all sides of a case. and to that end, i think both of you would provide the board with fresh perspective. and i think that's healthy. i did want to have the opportunity to maybe delve into separate items and i begin with dr. waller.
i think you have been neglected here a little bit and talk about -- you are from the st. louis fed and can you talk about what the differences are between what you see in the upper midwest with regard to the agriculture economy and the rest of the economy which has really been significant in terms of its growth and the agricultural economy has been slow because they have been on the tip of the spear of the negotiations going on. can you talk about what you have seen in your previous work. dr. waller: a large part of my job is to talk to members of our community, bankers, business people, and we have a big agriculture section. we are the largest soybean producer in the united states. the trade wars with china have had a huge impact on our ag sector and we hear it all the time when we go out and talk. we are hoping that some of the deals that have been signed will reverse this and there won't be persistent decline in farm income. also hopefully put support on land prices which have been drifting down which could potentially be a problem. but we are hoping some of the trade uncertainty with china will alleviate this pressure.
senator rounds: dr. shelton, they made it very clear that they think you come from a unique perspective with regard to your discussions in an academic sense with regard to the gold standard. they have suggested or at least some of your critics have suggested that you would not be independent. i have looked at some of your writings. it would appear to me that you have taken almost a devil's advocate approach in some cases. i think the chairman of the fed, chairman powell, has made it clear, he looks for different points of view. and each time we ask you questions, we leave the question a little bit. i would like to give you a few minutes and i have 1:53 left. but would you take some time here and just plain what your thought is what your thought is to the gold standard and what you see as a member of the board being a team member and also being an independent member as well.
in south dakota, we value that independent point of view and think it is important. and would like your thoughts without being led into any question. dr. shelton: i appreciate that, senator rounds. i keep going back to the fact that the power to regulate the value of u.s. money is granted by our constitution to congress. it's in article 1 section 8. and in the very same sentence, congress has given the power to define official weights and measures for our country, because money was meant to be a measure, to be a standard of value. and i think that money has to work the same for everyone in the economy.
and it's important that it serve that purpose as a reliable measure so that people can plan their lives. i don't see how you can have a free market economy if people can't rely on the most vital tool that makes markets work. it's through money that we transmit market signals and you need clarity of those signals or supply and demand can figure out what is the optimal solution. so i think that the importance of being responsible in discussions at the federal reserve is the responsibility to remember that the money has to work for everyone and that in a sense it's a moral contract between the government and the citizens. senator rounds: thank you. thank you, mr. chairman. >> senator smith. senator: many of us on the committee have great interests and concerns about the independence of the fed.
dr. waller, you believe the fed was designed to be an independent institution, yes. dr. waller: yes. senator: is that an important feature that allows the fed to work? dr. waller: the structure of the fed, everything is designed to give the fed to conduct monetary policy according to achieving its goals congress has laid out. congress gives us the goals and gives us the freedom. >> federal reserve for the united states or think it's
healthy that quote, criticism of the fed is out in the open. what do you think of that? dr. waller: the institutional design of the fed is what gives its independence. having confirmed board members and regional members who are not political appointees provide a check. the overlapping long terms of office give you some protection in the sense of being able to think in the long run for the good of the country. the fact that we don't make policies by one person that is actually a group that has to make that decision requires some degree of consensus and how you develop policy.
senator: there isn't referenced independence in the legislation that defines the role of the federal reserve, you mean there isn't independence? dr. waller: it's the institutional design is what gives you your independence. do you believe in independence? dr. shelton: absolutely. senator: if that is the case, what did you mean when you told a u.b.s. executive in an interview four months ago that you don't see any reference to independence in the legislation that is defined the role of the federal reserve for the united states, what did you mean by that statement? dr. shelton: in researching the language of the 1977 federal reserve reform act and in the humphrey-hawkins legislation, i was searching for that to make that statement.
i was surprised it was not asserted more clearly. but as dr. waller was saying, the operational autonomy of the federal reserve assures its independence over and above its political independence which is guaranteed by having members who think for themselves as i believe every member of the open market committee does. and the only one who can reverse an interest rate decision of the federal reserve are the members of the fomc themselves as they did last year. senator: you think it is healthy that quote criticism from the white house is out in the open. do you think it is healthy for the president to criticize the fed? dr. shelton: as i said, i think in the past some federal reserve officials have suggested they
quietly pressure. and it is transparent. i don't censor. everyone has the right to criticize the federal reserve. senator: isn't this an amendment to influence the fed, which wouldn't that suggest that the president doesn't believe in the independence of the ned because he is attempting to use his significant power in order to influence the fed? doesn't that mean he doesn't believe in the independence of the fed? >> i don't think someone in that position of responsibility is easily intimidated. i think that's what you are looking for is people who think for themselves and that's why i appreciate this committee judging nominees for exactly that characteristic. so i do not think that anyone on the fomc is affected by political pressure. senator: my view is that this is
clearly the president attempting to undermine the independence of the fed. i know i'm out of time. thank you very much. >> senator kennedy. senataor kennedy: assume you are queen for a day and running the federal reserve and have unfettered decisions. assume that different circumstances in the united states and the world are the same as they are right now except the bottom is falling out of consumer confidence and spending. unemployment has jumped from 3.5% to 6.5% and we are in a recession. how would you get us out? dr. shelton: thank you for the
question. it's hard to imagine that situation -- senataor kennedy: how would you get us out? dr. shelton: it wouldn't be up to me if i were queen. senataor kennedy: please assume what i just told you and you are running the federal reserve and don't have to answer to anybody. i think you understand the question. dr. shelton: i would go to the mandate and talk to the other members of the fomc about the appropriate monetary policy. senataor kennedy: what is the appropriate monetary policy? what would you do? dr. shelton: the problem we have now is we are very close to zero on interest rates. senataor kennedy: what would you do to get us out of the recession? dr. shelton: we are down to the other tools that the federal reserve has. senataor kennedy: would you lower interest rates? dr. shelton: i would never go negative.
i'm averse to that idea. senataor kennedy: i'm not trying to be rude, would you take them to zero? dr. shelton: at the maximum. and i don't like to say you would eliminate courses of action, but i would very reluctant to go below that. senataor kennedy: you would take them to zero but wouldn't go negative. dr. shelton: it undermines the financial structure. first, i would make it clear there are limits to monetary policy. at some point, you really can't stimulate growth. senataor kennedy: you would go to quantitative ease. dr. shelton: that is your only alternative. senataor kennedy: what volume would you use? 3.5% to 6.5%.
bottom falling out of consumer confidence. how much are you going to buy every month? dr. shelton: every round has been less effective than the prior rounds. senataor kennedy: how much are you going to buy? dr. shelton: looking at the most recent one, so approximately $80 billion a month. senataor kennedy: we are already deficit spending and we are chasing losses. like a problem gambler. but would you recommend fiscal stimulus and we have a stimulus package? dr. shelton: that's up to congress. senataor kennedy: i'm asking your recommendation. i get that. dr. shelton: there might be incentives. senataor kennedy: would you recommend that we go to a stimulus package? dr. shelton: if you can restore business confidence and encourage business capital investment, that could be helpful.
senataor kennedy: we should increase deficit spending. dr. shelton: i don't like deficits. in an emergency situation, the most important thing is to restore -- senataor kennedy: i get that. would you recommend that we deficit spend dramatically? dr. shelton: reluctantly if it appears there is sometime you -- there is stimulus potential in doing so. senataor kennedy: that's a yes? dr. shelton: if you are down to the wire. senataor kennedy: i have 38 seconds. dr. waller, could you answer my question, what would you do? dr. waller: this would be the standard monetary policy tool kit and cut interest rates as low as you could to zero. look at forward guidance which was trying to signal to the markets. senataor kennedy: try to talk them down.
dr. waller: you need fiscal support. i wouldn't want to go negative. senataor kennedy: would you have do quantitative easing? how much? dr. waller: i don't know. that would be a quantitative measure. senataor kennedy: what's your gut tell you? 3.5 to 6.5. i'm going to land this plane. dr. waller: $500 million. >> senator. senator: i appreciate the line of questioning. dr. shelton, let me ask you this in july of 2015, you presented at the cato university an op ed in response to a question you you said, i don't trust government statistics on g.d.p. growth or on inflation.
what specifically about those statistics do you distrust? dr. shelton: it is a challenge to look at particularly with regard to inflation the variety of indexes. we are familiar with the consumer price index and use that index. i'm not sure that either captures the impact of technological innovation that is a basket of goods priced at a certain level that might deliver more in terms of services than say a telephone from 20 years ago. i'm not saying i distrust. i'm just saying it's difficult to measure consistently through time consumer pricees and use that as the main tool for making monetary policy. senator: are there other government statistics that you feel the same way about? dr. shelton: i'm not sure which ones i would suggest.
senator: let me ask you this, there has been a lot of talk about the gold standard in your previous writings and your position on eliminating the federal deposit insurance and i was looking at your book that you wrote in 1994 and the last paragraph on the section that talks about gold convert built, you state that eliminating the federal deposit insurance would restore the essential character of banking into productive investments while striving to meet the risks and investments of depositors. would you consider that as an option to focus on and advocate for the elimination of the federal deposit insurance? dr. shelton: senator, no. i think that having deposit insurance is essential to maintain trust in the american banking sector and i was using an example to explain moral
hazards by suggesting that the owners of the bank, of a failing bank, maybe motivated to would gauge in more risky behavior than they would in the absence of government insurance. and i think it is important that the owners of the bank bear the brunt of the costs rather than have the government step in. senator: along with my colleagues, i'm concerned and let me say this. you have a history of writings and you should be proud of them, they are your beliefs and base in your background of experience, it seems like you are taking a 180-degree position on this just to take this position. how do we trust whether you are before us today and who you are today versus your writing in the past, who are we getting that is going to be on the federal reserve? you said you are from
fredericksburg, virginia but going to be representing california on the federal reserve. explain that to me. dr. shelton: i believe that issue you mentioned that at the end is decided by other people. i'm not involved with that, but my understanding is that all the governors are assigned effectively to a district and that my correlation with the san francisco district bank is quite strong. i was born and raised in california. my family behind me can verify that. and i went to school in california and oregon. my graduate work in utah, all of the states within san francisco district. my husband and i own homes in utah and california. my first position after receiving my doctorate was at the hoover institution in palo alto and i have a close association with california.
senator: who are we getting on the board, the woman who wrote and should be proud of it or the woman who sits before us today and countering everything she has said in the past. help me with that? dr. shelton: senator, you are getting the authentic judy shelton and i feel i have been intellectually consistent throughout my career focusing on monetary policy that is conducive to productive economic growth. >> senator cotton. senator cotton: there has been talk about gold today and worth its weight in gold before coins were actually weighed.
peso means weight and the british pound is the pound and the same latin word that libra and facebook and others have proposed as well which brings me to my point to ms. shelton the need of digital currency. to maintain the dollar's primacy in the world. these examples of a few that currencies have had the same properties whether they are liquid, stable, stores of values and eliminate inefficiencies of bartering and whether or not we need to have it be digital. and i'm not talking about crypto currencies but official bank digital currency. that is the direction china intends to go with the digital yuan.
china, like a lot of fragile developing economies you might say, needs digital currencies primarily internally because they don't have the kind of institutions whether it's the dollar or the federal reserve or the rule of law and rights of property and contract. the united states, we need the digital currency a little bit less internally and preserve the dollar worldwide. china has widespread youth -- use, but they hope to use the digital yuan worldwide to replace the dollar as the reserve currency. with all of the economic benefits that that brings to the united states and especially the security benefits it brings to enforce sanctions and just to use an example. china buys a lot of agricultural products in argentina and don't transact those in pesos but in dollars.
which gives us great leverage in enforcing our sanctions worldwide. if we do not move to add digitization to the dollar of those historical properties, a digital could replace the currency just as we replaced the pound in the last century. could you talk to us what you what the federal reserve can do to help protect the currency and address the need to have digitization as essential property of the dollar. dr. shelton: thank you, senator cotton. i think that's an extremely important discussion and i agree with your assessment. we are compelled to think about that. the dollar is the most important instrument of soft power that we have around the world.
and yes, it is a dominant reserve currency but can't rest on our laurels in that regard because as you suggested, rival nations are working very diligently to have an alternative to the dollar and while they can't beat us as a currency, they can add features, because there is a demand for digital access to banking services, to payments, and i think it is very important that we get ahead of the curve to ensure that the dollar continues to offer the best currency in the world, the most respected and most utilized and we need innovation to keep us going in the right direction and be a leader instead of observing what other countries might do. senator cotton: i'm thinking about the dollar worldwide, not domestic purposes.
governor brainard gave a speech about central bank digital currency and why developing countries need it, weak financial institutions and payment systems and domestic currencies. we don't face those nearly to the same degree. what i'm talking about is the need to have a dollar that is competitive in world markets and earned its position over the last century. that's why we replaced the pound and maintained that position against the euro. i don't want to see where we have a sputnik moment with our currency which we are no longer the world's deserved currency. thank you for your willingness to serve. >> senator jones. mr. jones: i appreciate you have
not had as many questions. i do want to direct my questioning to dr. shelton. dr. shelton, in 2011, there was a guy named bernard vonn nothouse and he was convicted in a north carolina federal jury of making, possessing and selling $60 million of his own precious currency. the u.s. mint had to issue a warning about this because he was -- they had to issue a warning that it was not legal tender and marked with u.s.a. and said trust in god instead of god in trust. the prosecutor accused him of domestic terrorism and written in his book that he denied 9/11 happened and compared its to those people who think har lee harvey oswald didn't kill president kennedy.
i would consider this guy completely out of the mainstream with regard to things. in a 2012 interview you called him the rosa parks of monetary policy. i may native alabamian. rosa parks has a statue in the united states capitol. she had in one act of courage anded the jim crow laws tried to bring down the walls of oppression. and this guy seems to be issuing defiance on a federal government policy, monetary policy and you helped praise that. you said because he is challenging what the federal government has done with regard to carrying out its constitutional responsibility to maintain. at the cato institute, you said -- when he praised you, you said
i admire your boldness and challenging the fed. in a way i respect. what am i missing? if that is not out of the mainstream of america, of history, i don't know what is. so tell me what i'm missing when you think a guy like this needs to be compared and what he is trying to do with the monetary policy of the united states, how that compares to the courage of rosa parks. dr. shelton: senator jones, the last thing i would ever do is demean the courage of rosa parks. senator: you did, you realize that, don't you? you did. dr. shelton: i apologize to the comparison. i truly do. the gentleman you are referring to, he did an audacious thing. senator: do you admire what he did and being convicted in a federal court in north carolina? do you admire that?
dr. shelton: i believe that he was testing the idea that the was testing the idea that the constitution in article 1, section 10 says that states can only use gold and silver as legal tender. senator: within the federal reserve, is that something you want to test? is that something you want to test? you are going to be within this if you get confirmed. you are placing that admiration inside the walls of the federal reserve? is that what we are to think? dr. shelton: no, senator. as i've said a number of times this morning, it's important to acknowledge that the power to regulate the value of u.s. money is granted to congress by the constitution, not to the fed. congress created the federal reserve as an independent agency and gave it monetary mandate to promote maximum employment, stable prices and moderate long-term interest rates and that is the framework of which i
would make decisions of confirmed. senator: you are creating something for north america currency called the amero. is that a good policy? dr. shelton: sometimes i am asked to think out of the box. and look at future scenarios. senator: is that a good policy or not? dr. shelton: i'm not pursuing that as an initiative, but i do think when the currencies of our major trading partners depreciate against the dollar, it changes the terms of trade. senator: i have heard the questions and answers and i have heard several senators question what you have written in the past. it reminds of a comment that my old boss talked about a number of people having a confirmation conversion. i think you said it best, that
we will get is the authentic judy shelton and that is what bothers me tremendously. thank you. >> senator tillis. senator tillis: i'm sure you are proud, and to the shelton family, your heart rate will reduce in about 30 minutes. i want to go back, i hadn't planned on going through this. i watched most of the hearing in my office before i came down here and i heard a lot of people quoting your writings and i want you to respond. i want to make sure that people understand the difference here. they are using quotes that you wrote that were actually quotations from other writings. for example, i think in one article that i believe used by senator tester and referenced by others, public law says full employment and balanced growth act of 1978.
in that public law, it says, the attainment of these objectives should be facilitated by setting explicit short-term and medium-term economic goals and congress, president and board of governors of the federal government. is that what you were quoting? dr. shelton: yes. senator tillis: they thought you were asserting the other -- the other judy shelton was asserting something else, but those were your words? dr. shelton: i was quoting. senator tillis: in fact, the words of congress. i find it remarkable on this committee we are talking about -- chairman powell was here yesterday, and we are talking about undue political influence, that's what we do every day when we bring the fed up. we are trying to assert our political influence and the president isn't more or lessen titled to do that and i don't think any president has failed
to do it. you made a point about at least in this case it's transparent , one thing you can say about the president and his communication style. we are fooling ourselves that any president has not tried to have a discussion about their view of where you need to go. can you cite an example. mr. waller, i will give you a chance to talk and you have been given a good pass. dr. waller, give me an example of where you have seen political pressure ultimately drive a political decision on the part of the fed. there's a long history of bashing and coercion of the administration on the fed. this has a long history. where thexample political pressure -- we're all
talking about fear, uncertainty, and doubt with the fed being politicized. i want an example where that political pressure drove the fed to do -- to make a decision that wasn't founded in the mandate. dr. waller: the classic example in monetary history is richard nixon and arthur burns, they put -- nixon put a tremendous amount of pressure on burns to keep interest rates low to help with nixon's re-election, ast the best example i have. >> i've seen influence work in reverse, i'm sure you're aware of former governor dudley's comments about make things go south to keep president trump from being re-elected. do you think that was inappropriate? dr. waller: that was inappropriate. dr. shelton: certainly. >> we also talk about independence. i agree with what everybody said about independence. from undue political pressure.
what i have a real problem with, a couple of examples right now is the fed asserting its independence from oversight or asserting its independence from the administrative procedures act. chairman powell yesterday in response to a question i had about the g.a.o. estimate about that not having been appropriately promulgated concerns me. because i get that you need to be independent. but you have to be answerable to the laws that other regulatory agencies are answerable to. i'm not going to ask you to respond to this question now, because i'm going to finish on time, but the general counsel in june of last year, in response to the g.a.o.'s assessment that there was the guidance had risen to a rule and should have been promulgated in that manner said we're assessing whether or not our guidance is accountable to the g.a.o. that's an absolutely unacceptable answer. for anybody here, you all know.
chairman powell can give a comment at an oversight hearing or make a speech and it can have a ripple effect ridesing to a level of a rule. to sit here and say that well, guidance isn't really rule make, it's not material to the examination process, defies any knowledge i have of how examinations go on and what goes on in private, confidential meetings. i'm going to submit for the record roughly the same question i had yesterday for chairman powell. thank you and congratulations. >> senator van hollen. senator van hollen: thank you, mr. chairman. thank you both for being here. ms. shelton, i'm sure you've been covering, or catching the article that was been coming out with respect to your record years ago compared to now. and there does seem to be a pattern of total flip-flopping. if you look at the period of time when bernanke and yellen were the head of the federal
reserve, you criticized them for, let's see, cheap money, fake economy, you were a deficit hawk, you wanted tight money then. in 2011, you criticized the federal reserve for weakening the dollar to improve exports, in order to improve our economy back home. the only pattern i see here is a political one. not an economic one. and i think that's what concerns a lot of people. because we want somebody on the federal reserve who is going to look at the economic facts and draw conclusions from those, not the political facts. so i want to also ask you in that regard about positions you've taken on the deficits and debt. i've had concerns myself over the years about deficits and debt. here's what you wrote back in 2009 which of course was still during the economic downturn and so the economy was hurting,
obviously economic stabilizers kicked into effect, but you wrote in the "wall street journal," unending fiscal deficit, unconscionable accumulations of government debt, these are trends that are shaping america's future. and you go on to predict that there will be flight from the dollar, our nation's money is being severely compromised, and it's going to be gloom and doom. none of those predictions proved to be true, did they? dr. shelton: i think it was a very unhappy period in the wake of the 2008 crisis that was devastating. across the country. and we engaged with the federal reserve seeking monetary stimulus in extreme measures going to near zero interest rates and massive purchases of
rates and massive purchases of government assets. senator van hollen: and i think i heard an exchange earlier with senator kennedy where you said if we had that kind of economic downturn yud look at using those tools. is that correct? dr. shelton: yes. senator van hollen: but you were very critical. the record is pretty clear you criticized them strongly for taking emergency provisions back then. you said the increase in the national debt was unconscionable. even though as you know when you have economic downturns, your g.d.p. goes down. your economic stabilizers go into effect. there's more money spent on things like medicaid. but i guess my question is was it unconscionable for president trump to add $2 trillion to that already unconscionable debt in passing the tax cut chfment is actually now taken projected debt to g.d.p. to much higher levels than what you predicted in our annual deficit, the last year of the obama administration, the deficit was 3.2% of g.d.p.
in 2019, it is 4.6% of gdp. my question is, in order to be consistent, did those policies supported by the president, are they unconscionable when it comes to our deficits and debt. dr. shelton: senator van hollen, if i may take us back to 2009 to compare my consistency. the immediate fiscal response was an $800 billion package of government spending that ultimately turned out not to have the stimlative effect as we might have hoped and there was talk of projects that weren't shovel ready. we went to these extreme monetary measures likewise trying to stimulate in the wake of this meltdown. there's a cost to that. for the years from -- senator van hollen: you're just not answering my question. it's a simple question. look, we can all -- people are
entitled to their own opinion , but not the facts. the congressional budget office of fiscal stimulus disputes, which is exactly what you just said. and my question to you was, is it unconscionable to increase the debt over the next 10 years by $2 trillion? if it was already at unconscionable levels back in 2009 is it unconscionable to add another $2 trillion to an already unconscionable debt, yes or no? dr. shelton: i think we should always strive reduce the deficit because it does put a burden on future generations. senator van hollen: this is the problem. the problem is you've got a lot of writings, strong write, of a very political nature. now you're responses today are totally inconsistent with the positions you've taken in the past. the only thing that's changed is who is in the white house. thank you, mr. chairman. >> senator warner. senator warner: you're down to the last one.
let me thank both of you for the meetings that we had. i enjoyed our conversations with both of you. i do hope dr. shelton, in terms of our conversation about our common ties to virginia and where we both live and the fact that you -- you were nominated from virginia to the european bank of reconstruction, that you're not changing that status as well in terms of how the administration has put you forward this time. i know we talked about your wall street journal edtorial. i went back and read it. i think you put forward some views i don't necessarily agree with but you put forward clearly. one thing we come back to, the humphrey hawkins. you did at least mention in the article but i don't think you've
mentioned in your commentary to most of the questions at least that i've heard is that humphrey-hawkins expired in 2020. it's no longer the law of the land. i'm not sure that's still a fair notion, and i was going to also raise the question, senator -- -- senator van hollen raised. we talked about this in my office. i feel very strongly around debt and deficit. i don't think either political party has much legitimacy on the issue anymore. but i do think there is a -- very much a change in consistency. in your view under what was happening under obama where a group of us in both parties tried to bring down the debt and deficit to the chagrin of some aisleon both sides of the
that suddenly got blessed under president trump. i know you've addressed it. but it is a real concern to me. i don't doubt your integrity but i question your consistency on this. i want to go to another piece. in your writings, you said that it would be appropriate for the fed to consider international monetary stability and decision in an era of worldwide currency exchange. the question i feel and i agree and many, many both parties, that currency ma nip sleighs bad -- currency manipulation is a bad thing. i don't think currency manipulation falls within the gambit of the fed's responsibility. do you want to speak to that? >> it doesn't fall under the fed's responsibility. any other prior monetary arrangement had to be approved by congress.
i do want to point out that in the article you're referring, i specifically want to say humphrey hawkins expired -- >> i know, i wish -- what i feel like in many of the conversations that you had, you started without that full point. i feel pretty strongly on your change on the debt and deficit issue, i have concerns about the fed in terms of playing a role in currency manipulation. i think it is outside of its gambit. and i want to also reference one of my colleague's points. i don't fully agree that every president and every member of congress is always trying to
overly influence the fed. i think, dr. waller, your comments about president nixon and chairman burns were dead-on accurate. i think it had enormous blowback. one of the challenges that i'm grappling with, dr. shelton with your nomination, is i think you have had a series of views that go beyond the dual mandate. i commend you for some of them. some i agree with, some i disagree with. the challenge that i think is unprecedented is we have a president that goes so far beyond the norms of trying to outduly influence all independent parts of our government, the fed independence being something we generally share complete commonality with,
and when your views in some of your writings, my takeaway is frankly would reinforce that effort to kind of go beyond the duel mandate. and with this level of influence that president trump is willing to influence on every action and i think again, unprecedented in terms of the tax on chairman -- his attacks on chairman powell. it raises grave concerns. but i very much appreciate you both being here. i appreciate the conversation. dr. shelton i did enjoy our conversation yesterday. >> i did too. >> i thank you for the chance to raise those. thank you. >> to our nominees, although senator warner thought he was last, senator broun would like to have another couple of questions. i told him he'll have a couple of minutes. so has senator shelby. if you want to, i'm not encouraging it.
>> you are not encouraging more questions? >> the vote started 10 minute's, we don't have much time. >> mr. warren, we don't have much time here, mr. waller, given ms. shelton's answers on monetary policy and her 30 years of writing on the gold standard, would you recommend we confirm her to the fed? >> senator, that's your decision, not mine. >> i figured that would be your answer. let me ask it a different way. you're at st. louis fed, right? >> correct. >> if you were interviewing for your research department would you hire her? >> i have a very different research department in terms of the type of academic research we do. she's been much more in the public light. my department is all publishing for academic journals.
>> if someone brought her body of work and writing to you would you hire her? or him? >> her outlets are compared to what we expect our staff are two different outlets for research. >> a last statement. the takeaway is we don't know who we're nominating to the federal reserve. ms. shelton has disavowed 40 years of her writing to say what she needs to say to be confirmed. it isn't just my colleagues on the democratic side of the aisle who are concerned. senator shelby is concerned, i've heard others, but conservatives outside of this boddy are concerned. american enterprise institute desmond lachman urged the senate to reject her nomination. he wrote normally a person would be in favor of either an easy monetary policy to stimulate the economy or a horde monetary policy to exert displiplin on the government. either way one would not expect her to hold both views at the same time. yet ms. shelton does exactly
that. a.e.i.'s says her rationale prescription for monetary policy has changed so dramatically, her rationale makes so little sense as to make her appointment to the fed a gamble. does she believe what she's now saying or is she just saying what trump wants to hear? if the lalter, then the fed would she stick with her rigid anti-inflation at any cost or would show do whatever president trump wants? >> for years, economists, as you both know, adhered to the phillips curve which describes an inverse relationship between inflation rates and unemployment rates. this was mentioned earlier.
typically lower unemployment has generally produced higher inflation. this is in the past, i guess. and vice versa. in recent years, as unemployment has decreased, inflation rates remained low, thank god. what are your thoughts on the current relationship between unemployment and inflation and how as the relationship between the two changed over time? is there a new equation here. >> i'll make two comments. first of all, if you were to go to any ph.d. program in economics today and you were taught fundamental model of unemployment there's no inflation in that model. so even at that level of graduate training, nobody talks about inflation and the level of unemployment. second point -- >> with price stability you have
to be thinking the specter of inflation somewhere. >> that's where i was going with my second point which was that one thing we've learned on monetary policy research is that if you have a central bank who is very committed to a, say, 2% inflation target and that's credible that they're actions will keep inflation near that target, then inflation never really moves off that target no matter what happens with the unemployment rate. the relationship looks like it's completely broken down but it's because the central bank has so much credibility in its inflation target that nobody deviates from it. >> but if inflation stays low, does that give -- senator kennedy got into it, i think, -- would that give the fed a tool in case of crisis? >> i think what it does is gives us a different way to think about how to raise interest rates and that's, i think, what -- >> that's a tool, right? a tool, an option? >> correct. your credibility is everything. you laid it out.
it's the confidence in our currency. confidence in our institution. if you lose that you're gone. >> confidence in the economy of the nation and the nation itself. >> correct. >> doctor? >> senator shelby, i think that's one of the most profound developments that has happened particularly in the last three years. the change in thinking and the realization at the federal reserve which is steeped in the phillips curve tradeoff mentality that you can have low inflation and low unemployment at the same time. in fact it's a perfect, stable foundation for productive economic growth. and that's when you start to see not just the g.d.p. increase, but the increases in productivity which then justify gains in wages and the increased output is such that you don't get inflation. so i think this is very important for the future
monetary policy. >> so low unemployment and stable prices, low inflation, that's two mandates of the fed itself, is that correct? >> yes. >> ok, thank you. thank you, mr. chairman. >> all right, thank you. i will take the last word. we -- did you have a question? i won't do it now then. >> it's going to take longer than 30 seconds. we thought there were plenty of reserves but it wasn't dist -- distributed correctly, and the puzzle we're trying to figure out is why didn't the reserves flow from some banks to those that needed it? that's something we've been studying trying to understand. >> i think that it's partially a regulatory issue in the sense
that excess reserves have almost become mandatory. they are eight times higher than required reserves. i think that the stated liquidity preferences of bank examiners makes banks feel that they need to keep that ready cash and they were reluctant even to chase a 10.5% overnight repo rate. >> i'm done. that's it. >> ok, thank you. i'd like to make a final comment. we all knew there was going to be -- this was going to be an aggressive hearing today, particularly with regard to you, dr. shelton. i think you have been very solid in explaining and defending your writings and positions. and by the way, the reason that i introduced into the record in my opening statement an article from "the wall street journal" entitled the war on judy shelton was just to help make the point that this is an orchestrated, calculated effort. i think you have done very well
today, i just wanted to tell you you've explained, i think, very capably, the positions that you take and the rationale for them. and i just want to appreciate the fact that you've gotten through that. that is -- >> if you're going to enter into the record "the wall street journal" article i'd like to enter the national review article. >> you just quoted it. and with that, we are done and we're on our way to our vote. thank you very much. >> thank you, mr. chairman. >> thank you. [captions copyright national cable satellite corp. 2020] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> c-span's "washington journal" live every day with news and policy issues that impact the.
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